910 Calle Negocio
2nd Floor
San Clemente, California
www.san-clemente.org
AGENDA REPORT
CITY OF SAN CLEMENTE
CITY COUNCIL MEETING
CITY OF SAN CLEMENTE
Meeting Date: June 17, 2025 Agenda Item: 10D.
Submitted By: Finance and Administrative Services
Prepared By: Charlie Smith, City Treasurer
Brian Brower, Chief Administrative Officer
Subject:
..titl e
CONSIDERATION OF A RESOLUTION TO SELECT PUBLIC AGENCY RETIREMENT SERVICES (PARS) AS THE CITY’S SECTION 115 PENSION INVESTMENT TRUST
ADMINISTRATOR AND IMPLEMENT AN INVESTMENT STRATEGY ACCORDING TO THE RECOMMENDATIONS OF THE INVESTMENT ADVISORY COMMITTEE ..body Fiscal Impact:
Approximately $1.18 million is available in the FY 2024-25 Budget for funding of the Section 115 Trust.
Summary:
At the Investment Advisory Committee (IAC) Special Meeting on May 27, 2025, the IAC unanimously agreed to recommend City Council approve Public Agency Retirement Services (PARS) to administer the City’s Section 115 Pension Investment Trust Fund (115 Trust) and has recommended the Capital Appreciation portfolio within the Tactical Management investment strategy.
Background:
In 2012, the Government Accounting Standards Board (GASB) issued Statement No. 68, which requires that governmental employers that sponsor Defined Benefit plans (i.e., CalPERS) must recognize a net pension liability (unfunded accrued liability) on their balance sheet. This represents the difference between the City’s total pension liability (actuarial accrued liability) and actual plan assets. GASB 68 became effective for fiscal years starting after June 15, 2014.
To reduce the GASB 68 net pension liability figure, the City’s only prior option was to commit additional funds to CalPERS (in excess of its annual required contributions) to reduce its unfunded liability. However, the IRS established that the City could create a separate trust to "pre-fund" its CalPERS unfunded liability. This would provide the City with an alternative to sending funds to CalPERS that will allow for greater local control over assets, with future excess contributions transferred to CalPERS at the City's discretion. The 115 Trust permits the City, under federal and state law, to invest in a diversified array of investments to maximize long term investment returns.
During the Long-term Financial plan on February 28, 2023, City Council reserved funds to be used toward the payment of the unfunded accrued pension liability. This amount was budgeted for $1.18 million in the Fiscal Year 2023-24 Budget. Since then, the IAC has reviewed and discussed several options: PARS (Public Agency Retirement Services), CalPERS (California 1 Attachment 3
Meeting Date: June 17, 2025 Agenda Item: 10D.
CITY OF SAN CLEMENTE
Public Employees’ Retirement System), and the possibility of the City establishing its’ own Trust.
After careful consideration, the IAC is recommending the 115 Trust be administered by PARS, under the direction of the City Treasurer with the support of the IAC. PARS administers a multiagency trust, with many municipalities participating throughout California.
Within PARS, the City has an option of both Index-based and Managed Tactical investment strategies, each with several portfolios of varying investment allocation and risk tolerance. The Managed Tactical Strategy offers Conservative, Moderately Conservative, Moderate, Balanced, and Capital Appreciation portfolios, which are tailored to meet the needs of an organization with regard to risk tolerance and financial goals. The IAC is recommending the Tactical Management Strategy, with a Capital Appreciation portfolio/risk tolerance. It is important to note that once selected, the City is not locked into a particular investment strategy. PARS allows flexibility for the City to move to a different portfolio, should the City choose to refine the investment strategy.
Approximately $1.18 million was appropriated in the FY 2023-24 Budget for payment of the unfunded accrued pension obligation. These funds were carried forward into the FY 2024-25 Budget and are available to provide preliminary funding of the 115 Trust.
Council Options:
Adopt Resolution No. 25-86 which will establish PARS as the City’s Section 115 Pension Investment Trust Administrator and Implement an Investment Strategy according to the recommendations of the Investment Advisory Committee.
Modify and Adopt Resolution No. 25-86.
Continue the item with direction given to staff.
Decline to Adopt Section 115 Pension Investment Policy.
Environmental Review/Analysis:
Not a “project” pursuant to the California Environmental Quality Act (CEQA).
Recommended Actions:
Staff Recommendation ..recommendation
Adopt Resolution No. 25-86, which would:
1. Authorize the City Treasurer to execute the agreement between the City of San Clemente and Public Agency Retirement Services (PARS) to administer the City’s Section 115 Pension Investment Trust Fund (115 Trust); and
2. Approve the IAC recommendation to select the Capital Appreciation portfolio within the Tactical Management investment strategy; and
3. Authorize the preliminarily funding of the 115 Trust in the amount of $1.18 million from General Fund account number 001-203-48630; and
2 Meeting Date: June 17, 2025 Agenda Item: 10D.
CITY OF SAN CLEMENTE
4. Authorize and direct staff to take such other and further actions and execute such other and further documents as may be necessary to accomplish the purposes of this resolution. ..end
Attachment:
1. Resolution No. 25-86
2. PARS Trust Agreement dated Nov 5, 2014
3. Draft Agreement for Administrative Services
4. Sample Adoption Agreement
5. Sample Trustee Investment Management Fee Schedule
6. Sample Authorized Signers Form
7. Sample Investment Strategy Selection and Disclosure Form Notification:
None.
3